Buying a car is work, and just when you think you've found the right deal and are ready to close, you get hit with what's known as the documentation fee. If you go in without knowing exactly what the fee is and what it's for, you could be pressured into paying it and then feel like you were taken for a ride when all is said and done. The big question is, what is the fee and do you have to pay it?
It's easy to get intimidated by car salespeople, and the Finance & Insurance person can be even tougher. They're what's known as the "closers", and they know the lingo and have done it thousands of times to customers savvier than you. So, what should you do before you even go to the dealership? Be prepared, and you'll be better off than 99% of the customers walking through that door.
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What Is the Documentation Fee For?
The documentation fee is essentially a charge the dealership tries to pass on to you for processing the paperwork related to the sale. Sometimes called a "doc fee" or "conveyance fee," this cost is supposed to cover the paperwork for the purchase, title, and registration of the vehicle. Some states cap the fee, while others, unfortunately, leave it up to the individual dealerships, so the costs can be high.
Check Out Your State's Documentation Fees
What to Do When It's Time to Close the Deal
Once you know what your state caps the fee at (or if they don't at all), you can be prepared to negotiate. Just because a state doesn't cap it doesn't mean the dealer will charge a high fee (though this is likely). It's important to have all of this information prior to the negotiation process, and they'll know you're a savvy buyer as a result. This will also help you get closer to the purchase price you're looking for.
- If you don't know the fee, ask the salesperson before you negotiate so you're armed with knowledge.
- If the fee is high (more than a couple of hundred dollars), start pushing harder to lower the sales price of the car.
- Don't shake
on the price until you get to the F&I department to see the associated fees on paper. - Ask F&I if they can reduce or eliminate the documentation fee, but oftentimes it's pre-printed on the contract. If they won't budge, revisit the purchase price and ask them to be more flexible.
- Be prepared to walk away if you're not satisfied. They may relent.
The Dealer Makes Money, No Matter What
Dealerships will sometimes tell you that they're not making much on the sale of your car, or that they're selling it to you at a loss, trying to justify the doc fee. When it comes to car sales, even if they say this, they'll make money on sales volume. Manufacturers give incentives to car dealerships when they meet specific sales goals, so don't let them get the best of you. You don't owe the dealership any favors, but you can't push too hard on a car that you know will sell if it's in high demand. Be realistic, but also be ready to negotiate smartly and leave if it's not the result you want.